In previous studies we showed that CD25+(CD4+) natural regulatory cells bear surface TGF-beta in the form of TGF-beta linked to latency-associated protein (LAP)(an inactive form of TGF-beta). In addition, we showed that one can detect TGF-beta in membranes of CD25+ cells but not CD25- cells in immunoprecipitation studies. On this basis, we postulated that this surface molecule was essential to the suppressor function of CD25+ cells since the latter could be inhibited in vitro and in vivo with anti-TGF-beta and only cells that bear surface TGF-beta could protect mice from colitis in a widely used model of mucosal inflammation known as "cell-transfer colitis." Nevertheless, this mechanism remains controversial since it can be shown that CD25+ cells from TGF-beta knockout mice retain the ability to act as suppressor cells. In the present study we gather new data supporting the essential role of TGF-beta in CD25+ regulatory cell suppressor activity. In initial studies using a novel assay system in which mink lung epithelial cells transfected with a SMAD-responsive promoter driving a luciferase reporter gene is used to detect active TGF-beta on the surface of cells and in solution, we showed that CD25+ T cells express TGF-beta in a functionally active form: upon cell-cell contact with the mink lung indicator cells, CD25+ cells induced activation of the SMAD-responsive promoter and induction of a luciferase signal. This response was blocked by the addition of anti-TGF-beta, thereby confirming its specificity. In further studies, we showed that the suppressor function of CD25+ T cells in standard in vitro suppressor assays that depend on the proliferation of CD25- cells as a read-out, is blocked in a dose-dependent fashion by addition of a specific inhibitor of the TGF-betaR1 component of the TGF-beta receptor. This inhibition was seen in an assay in which the T cells were stimulated in the absence of APC's by anti-CD3-coated bead-driven as well as in anti-CD3-APC-driven assay systems. Finally, we showed that in anti-CD3-APC-driven, but not in anti-CD3-coated bead-driven assay systems, suppressor activity could be inhibited by addition of anti-CTLA-4 and that, in fact, beads coated with CTLA-4 acted as artificial suppressor cells. To understand how CTLA-4 was affecting the suppressor function of CD25+ T cells, we conducted flow cytometric studies in which we showed that CTLA-4 coated beads sequestered B7 molecules on the surface of anti-CD40-driven APCs. Thus, the CTLA-4 beads deprive CD25- T cells present in the culture of co-stimulation. Since we and others have shown that signaling of CD25+ cells via CTLA-4 enhances both TGF-beta secretion and surface expression such sequestration enhanced the TGF-beta-mediated suppression. In addition, TGF-beta may be necessary to prevent re-expression of B7 after CTLA-4-mediated sequestration. Thus, CTLA-4 plays an adjunctive and TGF-beta-dependent role in CD25+ suppressor activity.